2024 Tax Planning - Do it before 12-31-24!

Tax planning - do it BEFORE 12-31-24

 Hello again clients & friends!

 This is 2024's main tax planning blog...

 Most taxpayers file on a "cash basis" & any tax planning must be done prior to year-end, typically before December 31st. Making changes next January won't affect most 2024 tax issues. 

 please note: some of the following tax planning ideas assume (require) that you can itemize deductions! Many taxpayers (me included!) cannot itemize this year due to the new(er) tax laws... and if so, those planning ideas will have NO effect - please see my (IF) footnote throughout this blog. (ie. the planning idea works only IF you can itemize deductions)

 (a few also may have no effect, if you are high-income & subject to the alternative minimum tax, AMT)     

 * Review the – “2024 Tax Pocket Guide” provided to you (in last years’ blue tax folder)

 * Review all "blogs" regarding tax issues - archived at www.garlandtaylor.com

 Note: since it is still only October, some links below have not updated for 2024 tax info...

Here are 2 basic tax planning questions

  1) "will your income in 2025 be the same or higher?"

   2) "do you believe tax rates will increase in 2025?"

 * Most taxpayers want to reduce taxes in the current year. If this is your goal, that can be accomplished by deferring taxable income - examples: waiting until 2024 to bill clients & sell stocks with gains or by accelerating expenses - example: making donations (IF), paying taxes (IF), or buying supplies/equip now. Note: this is a possible tax strategy & NOT investment advice! Be sure to talk to your vendor/broker, as they are your investment advisor & expert.

 * However, if you believe tax rates or your income will be higher in 2025 – then you may want to do the reverse - and accelerate taxable income into 2024 & defer deductible expenses until 2025.

 Earlier tax laws included changes that could remove your ability to itemize deductions (if less than $29,200 if married filing jointly… you will just take a “standard deduction”).

 Even if you can itemize, some deductions may now be limited – mortgage interest, state taxes, 2% miscellaneous, etc. Required distributions, AMT tax & Estate tax laws have been changed in the last few years. 2024 tax rates are different & may be reduced for inflation + for “flow-through” entities (some s corporations & LLC's) and corporations. Some tax regulations are still not final as of this date, but be sure to consider such possibilities when you tax plan...

 Here’s a link to a summary of recent IRS changes in the “new tax law”. Please also see prior blog articles on my website!  https://www.irs.gov/tax-reform

 Here's a list of things the IRS suggests "to get a jump on your taxes"

  * adjust withholding; make estimated or additional tax payments

 * gather documents and organize tax records

 https://www.irs.gov/individuals/steps-to-take-now-to-get-a-jump-on-next-...

 * Here's a link to online tax planning topics & tools from the AICPA, of which I am a member. American Institute of Certified Public Accountants (AICPA) is the national organization.

 just click on “topics”, calculators, or on “what’s new”

  Topics include – “working with a CPA” tax deductions & credits”   Calculators include – 1040 tax calculator & self-employment taxes calculator. Ugh, AICPA has not updated it (I complained, to no avail. yet)  https://www.360financialliteracy.org 

 Here are other links of interest…

 * IRS 2024 Tax Tips https://www.irs.gov/uac/Tax-Tip-Archive

* IRS NEW last year 2022 Inflation Reduction Act  

https://www.irs.gov/inflation-reduction-act-of-2022

 * IRS Affordable Care Act provisions 

  https://www.irs.gov/Affordable-Care-Act/Affordable-Care-Act-Tax-Provisions

 * Recent IRS news->  https://www.irs.gov/newsroom

 * 2024 Tax Law changes -> https://www.irs.gov/tax-reform

* 2024 Tax Law news, more -> Tax News - The Tax Adviser

 * IRS CARES Act -> things like advanced child care credits, employer payroll tax credits, latest updates on covid tax relief, etc…  Once again, the IRS has not updated this link for 2024 changes. fyi https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments

 * IRS SECURE Act - “Setting Every Community Up for Retirement Enhancement Act of 2019” (changes to required minimum distributions, etc) Retirement Plans FAQs regarding Required Minimum Distributions | Internal Revenue Service (irs.gov)

 * Federal Energy Tax Credits -> https://www.energystar.gov

  * IRS NEW Home Energy tax credits -> https://www.irs.gov/credits-deductions/home-energy-tax-credits

  * IRS NEW Clean Vehicle & Energy credits -> Clean Vehicle and Energy Credits | Internal Revenue Service (irs.gov)

  * Oregon Residential Energy Credits -> http://www.oregon.gov/ENERGY/

(please remember that some energy tax credits need to be applied for NOW, to obtain a certificate in the mail, before you can file your 2024 taxes)

Other credits or rebates must be applied separately from taxes, like the Oregon electric vehicle rebate https://www.oregon.gov/deq/aq/programs/pages/zev-rebate.aspx

* Oregon taxes, calculator + what’s new for 2023?  (should be updated for 2024 later in the year. Oregon Department of Revenue : Personal Income Tax : Individuals : State of Oregon

* Oregon surplus KICKER credit information (every other year, i.e. next year!) -> Oregon Department of Revenue : Oregon surplus “Kicker” credit : Individuals : State of Oregon

A g a i n -  d o   i t   b e f o r e   1 2 - 3 1 - 2 4

(IF) footnote - note: these planning ideas may still work for Oregon (as Oregon has much lower "standard deduction" levels), but not for federal - only IF you have itemized deductions (over $29,200 MFJ or $14,600 MFS/single $21,900 HOH).

 * determine if you need to adjust your payroll tax withholding (see “new law” link above for a calculator) or if you need to make estimated tax payments to avoid/stop underpayment penalties.

 * Pay any Oregon state taxes that you know will be owed (using Form 40-V). (IF) + you haven’t reached the $10,000 limitation.

 * Pay all real estate taxes (that are due soon, by 11-15-24), if only a partial payment was made. (IF) + you haven’t reached the $10k limit.

 * Pay your mortgage payment before 12/31, if it is due early in January 2025. (IF)

 * Talk with your pension advisor regarding retirement planning and contributions.

 * Talk to your investment advisor regarding benefits in selling and/or keeping investments.

 * Talk with your attorney regarding modifications in personal wills & business agreements. 

 * Go through your closets & garage & consider contributing items to a qualified charity. Be sure to keep a detail of values (cost & used value) & take pictures. AND, you must get a receipt from the charity. (You can find Goodwill & St Vincents’ valuation guides online or document the value yourself). The usual (IF)

 * Make charitable contributions by check or credit card & get written letters of acknowledgement. (IF)

 Again, for 2024 – at this time, it appears the $300/600 "above-the-line" tax deduction in prior years (ie. without itemizing) for cash/check charitable donations is still gone. Unless Congress/IRS renews that deduction, it expired 12-31-21 (CARES Act).

 * Defer income to 2025 & accelerate expenses into 2024, if that makes sense (see above comments) But, if you believe your 2025 taxable income will be higher or tax rates will increase next year - just reverse that basic tax plan)

 * Paying college tuition now might increase the tax credits for higher education (Note - there are income & other limitations)

 * Bunch deductions - There are "floor" limits for medical (still 7.5% of adjusted gross income/AGI) so, either pay expenses now in 2024 or later in 2025 - to "bunch" & exceed limits. (IF)

 * Take any required minimum distributions (RMDs) – note, major changes to requirements were made a few years ago, in the IRS SECURE Act for 2020. See link above & below for details. Be sure to talk to your banker or investment advisor each year so they can calculate this for you (rmd calculation is not part of income tax services). Please note that there are severe penalties for not taking the RMD. Retirement Plans FAQs regarding Required Minimum Distributions | Internal Revenue Service (irs.gov)

 * Use annual gift tax exclusion. No gift tax on gifts up to $18,000 per recipient. Be sure to discuss this with your estate planner before doing so.

 * Use your credit card to pay tax deductible expenses, but only if you need to

 * if you have a rental property, determine if the activity is a "trade or business" under the recent IRS cs199 (possible 20% deduction). There is a new safe harbor rule.

 https://www.irs.gov/pub/irs-drop/n-19-07.pdf

 * BIZ - Buy equipment, IF you need it (must be received & placed into service by 12/31/24. (but be careful - see the luxury auto & SUV rules... Which may limit the amount deductible)

 * BIZ - C corporations - pay bonus? or pay dividends? (fyi, some complex tax issues)

 * BIZ - S & C corporations - make sure you have paid reasonable wages for your services during the year & have written support for that. This is required & especially important if you take any cash distributions.

 * BIZ - If you sell inventoriable items, you must physically count at year-end (at your cost). You must do this every year!

 * BIZ - S corporations. Make sure you have sufficient stock basis in order to claim any losses or to take cash distributions (without creating additional taxable income).

 * BIZ - If officers have incurred/paid expenses personally - reimburse officers from the corporation under an accountable plan... (the 2024 IRS biz mileage rate is 67 cents per mile) or you can’t deduct them!

 * BIZ - If there are officer loans on the books, get rid of them if possible (to reduce potential audit risk).

* BIZ - if you are a large business entity, be sure to register & then file your Corporate Activity Tax (CAT) return (this is not part of my income tax preparation services). Oregon Department of Revenue : Corporate Activity Tax (CAT) : Businesses : State of Oregon

 * BIZ – NEW 2024 requirement! For most all businesses, be sure to file Beneficial Ownership Information (BOI) report. There are a few industry exceptions. Businesses in operation before 2024– file before January 1, 2025. New 2024 businesses, file within 90 days of starting your business. See link for more info/forms. Beneficial Ownership Information Reporting | FinCEN.gov

OK - Here's also a few things to do AFTER the year ends...

  * BIZ - File 2024 Forms 1096/1099's by 1/31/25 (order them NOW at 1-800-829-3676. (for rent, dividends, interest, services, etc that you paid in 2024.

 Order free forms by phone or online NOW at https://www.irs.gov/Forms-&-Pubs It will take a few weeks to get them!

 Note: there is a fairly NEW form for the 2024 payments to contractors, Form 1099-NEC (same as 2023). About Form 1099-NEC, Nonemployee Compensation | Internal Revenue Service (irs.gov)

Remember to properly classify workers as employees or contractors (you should do that before you hire them). Use these tests & then document the facts + your reasoning (in writing) for each person/entity. Be sure to talk with your Payroll Service vendor as they are your expert payroll advisor. Please note that there are severe penalties to you if you misclassify workers.

https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation

https://www.oregon.gov/oda/shared/Documents/Publications/NaturalResource...

* BIZ - File Personal Property Tax Reports with County Assessors office by 3/15/25 (all Oregon businesses must file this report, every year - check with your assessor’s office for forms) If you filed last year, you should receive a 2024 form in the mail. If not, you must call your Assessors office to get set this up.

(If you are in Multnomah County, here's a link to information & the online form, when it becomes available) https://multco.us/assessment-taxation/business-personal-property-informa...  just click on "confidential personal property return"

 Foreign bank & financial accounts - you may be required to file with the FBAR by APRIL 15, 2025. This is a new change (years prior to 2018 were due June 30th).

https://www.irs.gov/businesses/small-businesses-self-employed/report-of-... 

 Please see our annual income tax services engagement letter - CPA provides "no legal, payroll, pension, RMD, or investment services or advice"

Here's a summary of what I am doing for year-end tax planning before December 31st

P E R S O N A L

 * Itemized deductions – I’m not doing too much… since my mortgage interest is small & state taxes are limited to $10,000 – I’m not able to itemize this year for federal tax purposes at all. ie. My total deductions don't exceed $29,200. But I AM able to itemize for Oregon, since that standard deduction (MFJ) is much smaller, only $5,210 MFJ ($4,420 HOH, $2,745 single). Not a huge tax offset, since Oregon tax rates are typically only ~9-10%, but it is something at least! (IF) Ugh…

 * Doing a 2025 income tax projection – to see if my payroll tax withholding is adequate. I’ll make additional estimated tax payments if it is not (or pay penalties!)

 * Setting up a bright red folder marked "TAXES" and will place all 2024 tax documents there as they come in. Form W-2's, 1099's & Form 1098, pension data

B U S I N E S S

 * Locate and copy purchase invoices & support for any tax credit items (1099-T, for tuition, etc)

 * Order new Quickbooks software & computer hardware? I really don’t need anything this year, but if I did… make sure all equipment is delivered and operating by Dec31. If the cost is less than $2,500, I'll expense it this year (using the IRS "deminimis" election), reducing my taxable income.

 Be sure to categorize any/all 2024 equipment or software purchases under $2,500ea as EXPENSES (not fixed assets) in your accounting/bookkeeping software, to achieve that "deminimis" expensing tax election. Do not classify any items under $2,500 as fixed assets on the Balance Sheet, or you can't make this election. Make a written accounting principle declaration to that effect, in your files on or before January 1st each year.

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-p...

 * Reimbursing myself (from my s corp) for all 2024 biz mileage & business expenses purchased on a personal card. note: sole proprietors & single member LLC's don't need to reimburse, just keep good detailed records & provide those to your CPA at tax time.

 * Purchasing business supplies, paper, and postage. Reviewing equipment & software needs

 * Paying my corporate payroll taxes due 1-15-25, early & by Dec 31st (I am a cash basis biz). I’ve already prescheduled payments with IRS EFTPS and Oregon’s new online system called “Francis”.

 * Paying my office rent that is due January 1st (I'd pay business insurance too, if due Jan/Feb)

 * Entering all my accounting data into Quickbooks and reconciling my bank balance now. 12/31/24 statements can be gotten online so I don't have to wait for bank. I know my data in QB is accurate.

 * Order tax forms NOW (1099's, 1096, W-2, etc) from the IRS. This will take several weeks, so do it now.

 * Complete my personal property tax report (County Assessor should mail those out, later in December. If you filed last year)

 * round up my Goodwill receipts and calculate fair market values & list purchase prices so that i can deduct those as itemized deductions for Oregon.

 Again - the standard deduction for Oregon is much lower than federal, so you may still be able to take itemized deductions for Oregon!

Tax Records - what is required to keep?

per IRS -> You must keep records, such as receipts, canceled checks, and other documents that support an item of income, a deduction, or a credit appearing on a return as long as they may become material in the administration of any provision of the Internal Revenue Code, which generally will be until the period of limitations expires for that return.

https://www.irs.gov/taxtopics/tc305

please also see IRS publications 15, 17, 583, and 463 which are linked in the above url

Tax Records - how long to keep?

 Keep forever - all tax returns, real estate basis & improvement records. stock records too

 Keep for 7+ years - all evidence to support taxable income & deductions - (W-2's, 1099's, receipts, cancelled checks, logs, retirement plans, donations, etc.)

 How long should I keep records? | Internal Revenue Service (irs.gov) 

2024 Individual changes? If so, please just ask…

 If your 2023 taxable income, deductions, withholding, or estimates paid have changed significantly, it is recommended that you engage my firms’ services to perform a formal 2024 income tax projection. (to anticipate taxes due, make changes in payroll withholding & determine if additional estimates are required to avoid or stop penalties)

For my individual income tax clients... I look forward to working with you again!

2024 Business changes? If so, please just ask...

For my corporate & LLC tax clients - If you haven't asked me to look at your 2024 Quickbooks or other accounting data yet - that's also strongly recommended & now's the time, so I can still be able to peruse the file & comment before 2025. If you are cash basis - NO changes can be made after 12/31/24. 

 If you need help with filing form 1099's, sales or personal property tax reports, or reporting foreign accounts - please request that in writing (as these are not part of the income tax services provided. please see your engagement letter, if you're a tax client).

Tax Season, organizer…

Your Tax Organizer (PDF) will be uploaded to the Intuit Portal in late December or early January. That PORTAL is the recommended method to transfer all tax documents for 2024. It makes the process faster and more secure. If you did not use the Intuit portal last year & wish to have your Tax Organizer emailed or snail mailed (a paper copy), please let me know.

2024 tax preparation will be “virtual” again this year, since most all clients seem to prefer this method. Combined with portal use… it is much more efficient - speeding the entire process. However, if you’d like to meet in person, I will have a few in-office days scheduled set up for that purpose. I can also do a Zoom meeting, or talk by phone, if necessary.

But just like the last 3 years, most tax data can simply be uploaded to the Intuit portal. You can also mail it in or drop it at my front desk (still at 205 SE Spokane St Ste 300, PDX 97202) I also have a website portal where you can upload documents, but only if you have trouble accessing the Intuit Portal (as that is preferred & really - easier!).

Please email if you have any questions or concerns. I want to help!   

Thanks again for your business!

Stay safe & have a great Holiday season!

GARLAND
Garland Taylor CPA, Pres.
Garland R Taylor CPA, PC
205 SE Spokane St Ste 300
Portland, Oregon 97202

(503) 287-5584 telephone
(503) 287-6370 facsimile
cpa@garlandtaylor.com
www.garlandtaylor.com